SEC backs XBRL – are you ready?

The SEC announced Monday that it is planning a $53 million upgrade of its EDGAR database. The overhaul will rely on data tagging via XBRL to make it easier for investors, analysts, and the SEC to search for and compare data.

"It's the basic mission of the SEC to provide quality disclosure to investors. There are really only two ways we can improve SEC regulation," said Mr. Cox, in an interview. "One is by reducing the costs of regulation. The other is to improve the quality of the output. Interactive data let us do both," he said. [Excerpted from the Wall Street Journal]

The SEC intends to use "honey not vinegar" to attract companies to use XBRL, citing how the benefits outweigh the costs.

Rather than treating financial information as a block of text — as
in a standard Internet page or a printed document — XBRL language
provides a unique identifying tag for each individual item of data,
such as company net profit, for example.

That will enable users
to extract specific information more easily from SEC filings, run
calculations and aggregate data as desired. Company revenue, for
example, could be tracked over several years without having to open up
and review multiple filings.

''The new system will make it easier
both to file information with the (SEC) and to use it,'' Cox said.
''For investors and analysts, it will represent a quantum leap over
existing disclosure technologies.''

Companies won't be required
to use the new data system. But they will be encouraged to do so
because it will make it cheaper and faster for them to make regulatory
filings, Cox said. More than two dozen companies already have committed
to use the system, according to the agency. [Excerpt from AP]

Benefits:

Relatively small cost to convert financial reporting system to XBRL (SEC cites example of United Technologies, a $43 billion company that invested only $40,000 to make the switch)